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Abstract

This paper considers the contribution of foreign-owned plants and firms to aggregate total factor productivity (TFP) growth in Britain for 1997–2008 using data from the Annual Respondents' Database. The contribution of different sub-groups is further decomposed to show the role of continuing plants vis-à-vis reallocations in output shares. TFP is calculated using system GMM estimation. Taking into account the smaller initial size of the foreign-owned sector in 1997, foreign-owned plants contributed relatively more to aggregate productivity growth than UK-owned plants over the period. This strong performance is mostly the result of reallocations of output shares towards high productivity continuing plants and the opening of high productivity plants.